As tensions rise in the Middle East, President Donald Trump has intensified threats against Iran, declaring an "economic D-Day" aimed at crippling its economy. U. S. markets suffered their worst losses in three weeks on Thursday.
On Truth Social, Trump claimed Iran missed negotiation chances and warned of harsh economic measures. He threatened sanctions on any nation supporting Iran, stating that they would face "TREMENDOUS Economic Consequences." Conflict is disrupting shipping in the Strait of Hormuz, a key route for global oil supply.
On Thursday, U. S. crude oil prices hit $86.70 a barrel, with Brent crude nearing $93. Military actions have reduced traffic through the strait, where about 130 ships used to pass daily. Now, only a few make it through, stirring anxiety in energy markets.
While oil prices climb, U. S. stock indices tumbled. The Dow Jones Industrial Average dropped 703.84 points, or 1.32 percent, to 52,759.21. The S&P 500 fell 0.87 percent, closing at 7,641.16. Analysts noted the 30-year U. S. Treasury yield rose above 5.25 percent, nearing a two-decade high, showing investors' lack of confidence in U. S. bonds.
Scott Bessent, U. S. Treasury Secretary, reiterated more potential sanctions on those dealing with Iran. He announced an emergency measure to double the Treasury's buybacks of long-term debt to at least $4 billion, but markets remained unstable. Frederic Schneider from the Middle East Council on Global Affairs noted this reflects a strong market response to the administration's strategies.
Both the U. S. and Iran are feeling economic strain. Schneider mentioned that the U. S. Energy Information Administration doesn't expect a return to pre-conflict oil output until early 2027, with the disruption adding to U. S. inflation and complicating Federal Reserve rate decisions.
The U. S. Department of the Treasury reported total U. S. debt surpassing $40 trillion for the first time, driven by conflict costs and Trump-era tax cuts. The economic impact is also hitting Gulf states and East Asian economies, major holders of U. S. assets.
Trump's aggressive policy has drawn domestic criticism, with Senator Mark Warner questioning the wisdom of continued U. S. involvement. As midterms near, the war's unpopularity may affect the Republican Party.
Despite pressures, Trump defended the conflict at a rally, saying higher gas prices are necessary to prevent Iran from getting nuclear weapons. Yet peace talks remain stalled, with Iran refusing to engage until the Strait of Hormuz situation is resolved. Iran is negotiating with Oman over managing the strait, previously open for commercial shipping.
Trump's economic actions are affecting not just Iran but also the U. S. economy and its allies. The conflict keeps challenging U. S. economic policies and foreign relations.
